Budget for interest rate increases

**Dave A** · 05-Jul-09, 09:05 AM

We may be in for a period of relatively low interest rates, but I suggest if you're taking on new commitments, make allowance for the fact that interest rates could well rise again in the not too distant future.

First of all we have the budget deficit. Pravin Gordhan has indicated that tax revenue is down significantly, but government will keep on spending.

Stanlib economist Kevin Lings said he expected the budget deficit to approach 7%.

"That's quite high in South Africa's history," said Lings. "But our level of debt is incredibly low by world standards, so we are able to absorb this.

"They could raise taxes, but that is not a likely option, seeing that the economy is this weak. It wouldn't be the right move." He said it was risky to forecast the revenue shortfall a few months into the tax cycle.

"However, government expenditure is well ahead of budget and it's hard to see that getting reined in," said Lings.

Schussler said that interest rates are likely to increase, meaning that rates in the immediate future would probably not fall by more than half a percentage point.

Lings said an argument could be made for further interest rate cuts to support the economy, but the Reserve Bank's stance indicated this was unlikely. "I don't think the Reserve Bank will look at it this way," said Lings. "They seem to be saying they have done enough, so it is likely that we are at the bottom of the interest rate cycle."

Lings predicted that bond yields would move higher, with the percentage increase depending on "just how bad the government's financial situation is".

"Long-term interest rates will probably rise, but they were already very low, so it's not the end of the world," Schussler said.
full story from M&G here

So no great disaster for now, but sooner or later you have to pay the piper.

Second, we need to look at what is likely to happen in the recovery. Keeping on top of inflation is going to be a real handful, and with capital markets seemingy severely damaged, I think it's going to take some pretty healthy returns for liquid finance to come out and play.

Ultimately I'm troubled that our balance of payments relied so heavily on capital inflows when times were good. Do we have the capacity to build a healthy economy without reliance on external capital props when the recovery comes this time round? If not, capital funding is going to be a precious, and possibly expensive resource.

**sgafc** · 06-Jul-09, 10:55 AM

You right Dave, interest rates are likely to increase again. I hate to sound negative, but will the world economy ever recover? This time around the strategy is to bring the economic system completely to its knees, and replace it with the New World Order. Which will be completlely different from the world as we know it. In the pipeline is One World Currency, Microchipping of people etc.

Unless we wake up, and create our own alternative economic systems, the end is of the world as we know it, is here....

**Marq** · 06-Jul-09, 11:45 AM

and replace it with the New World Order.

Not yet - we need the Third world war to get going properly and 2012 scenarios to play out.

In the predicted scenarios of Siener, Notradamus, Cayce, Mother Shipton and others, as far as I know, there is no final world order for economic purposes as we think. It will be a new consciousness raised by a war of attrition whereafter the new age starts anew.

And my favourite of course is from LZ

And as we wind on down the road...
Our shadows taller than our souls,
There walks a Lady we all know
Who shines white light and wants to show
How everything still turns to gold.
And if you listen very hard
The tune will come to you at last...
When All are One and One is All --
To be a rock and not to roll.

**sgafc** · 06-Jul-09, 11:54 AM

And If you think there are no alternative economic systems.....check this out

http://money.cnn.com/2009/06/23/smal...air_trade.fsb/

**Marq** · 06-Jul-09, 12:31 PM

Yep -Bartering been around forever in various forms.

This article reflects a small town scenario where a basic swap of services does the trick. In an ongoing scenario however it seems to fail as an element of greed and consideration of value becomes an issue. It may have worked in the old days and it may work in a rural economy, where basic needs are the only issue but in todays world where we have many other items at hand and have seen a competitive marketplace work the odds are a bit skewed.

That however is not the reason it will not work in your world dominance scenario.

The taxman, politicians and power corporates like the banks will close it down. They cannot control it and they get no return from it. Therefore it is evil and therefore they will go out of their way to ensure its downfall.

**sgafc** · 06-Jul-09, 01:15 PM

No disrespect, but how do THEY(Banks, Corporates, Government) close it down? If I ask my plumber client to fix my leaking pipes(which I have done in the past), in return for forgoing a portion of his accounting fees, I have committed nothing illegal. Will the authorities come and "unfix", my pipes

. Remember you cannot put a price tag on value exchanged nor is it,next to impossible to control

**Dave A** · 06-Jul-09, 08:38 PM

As Marq points out, the problem with pure barter is it isn't sustainable to any large scale without becoming another form of currency.

The problem with barter groups that I've had experience with is that the instigators tend to "create money out of thin air." I wouldn't touch any of them with a barge pole.

At least the banks have some level of oversight.

**Marq** · 07-Jul-09, 07:15 AM

At least the banks have some level of oversight.

Arrrggggg......we were doing so well up to this point.

Even though barter has its downside, there has to be a mechanism along these lines that can work outside the controlling banking system. Barter offers a potential alternative or at least a potential that can maybe be worked into a viable system. We just have get back to basics, keep it simple and pull out the human survival type conditions that relate to a maslows needs rather than a - where am I going to get my next buck from needs - and stop turning to the banks for support that they will never give. Their 'level of oversight' is unacceptable given that they only have themselves in this picture.

**sgafc** · 07-Jul-09, 10:02 AM

Most Bartering systems do not try to supplant, normal cash. Some schemes actually endeavour to boost cashflow. And your are correct, controlling the bartering system can lead to all sorts of problems.

Our banking system, however is not clean. It is believed that the banking system is corrupt to the core. An alternative exchange mechanism may only work if the banking, "money out of nothing" system is destroyed.

Banks will have to close their doors if no one made loans, overdrafts or used credit cards. And that is even staying within the banking system, using only money in accounts, by paying cheques within limits(without overdrafts or overdrawn facilities), using debit cards.

If banks start loosing money, due to less excessive interest(prime plus), maybe only then can we exert pressure on them to either get their act together or close shop.

The concept is simple. If I have R1000.00 in my account, I can only spend
R1000 nothing more. Spending money we dont have, on things we dont need is the biggest contributor to our current debt crisis.

Overdrafts are another controversial "loan". Many businesses think they cant survive without it. Unless an overdraft is strictly used as a tool that finances working capital, and reverts to a nil or favourable balance, sometime, the user of an overdraft is in big trouble(ask many a business owner who was faced with a reduction facility, myself included) and the unfair charges and interest. All the so called benefits are outweighed by the subsequent problems. The reality is, we only have the benefit of an overdraft, once, therafter it becomes a nightmare.

Coming back to the money system. If we not going to look at another method of exchange, we will have to take action(peaceful, non violent, non compliance with the banking system). We cant whine and whinge about bank charges and interest rates and do absolutely nothing about it.

**wynn** · 07-Jul-09, 03:26 PM

A barter exchange seems like a great idea, even the PE paper has a swop column where you put your requirements up, say, "Mountain Bike, Nishike, R1500 or what have you"

So I could publish on a 'Barter Exchange site 'new bathroom needs to be plumbed R15,000, what have you?' provided I have something of equal value to barter.
The plumber then looks at what else is on the site to the value of R15,000 sees a bakkie he likes and so on until someone sees my ad for 'antique dining room suite' that they want and so the circle completes and everybody is happy?

I agree that it won't work with a credit system because someone will rip you off, but if you all have one or many things adding up to same value, material or labour, you have a deal.